Ratan Tata appears before PAC in 2G case

Chairman of Tata Group Ratan Tata attends the annual general meeting of ''The Indian Hotels Company Ltd'' in Mumbai August 5, 2010.
REUTERS/Danish Siddiqui/Files

By C.J. Kuncheria and Nigam Prusty| NEW DELHI

NEW DELHI Tycoon Ratan Tata appeared on Monday before a parliamentary panel probing a multi-billion dollar telecoms graft scandal that has badly dented the government's credibility and alarmed investors in Asia's third largest economy.

The scandal has sparked worries several firms could lose valuable telecoms licences after investing billions of dollars in India, prompting Norway's prime minister to lobby his Indian counterpart on behalf of state-controlled Telenor, one of the affected firms

Tata, 73, declined to make any comment to reporters as he emerged from the three-hour hearing at parliament house.

But the head of the Public Accounts Committee (PAC), which is investigating the grant of cellphone licenses, said Tata was forthcoming in his answers to the panel.

"Ratan Tata was very candid. He replied to all questions from members with an open mind. He did not conceal anything," Murli Manohar Joshi said.

The questioning of Tata comes two days after police made the first indictments in the case, naming former telecom minister Andimuthu Raja, a unit of Reliance ADA group and the Indian partners of Etisalat and Telenor among the accused.

Neither Tata, ranked No. 61 in the Forbes list of the world's most powerful people as head of autos-to-software conglomerate Tata Group, nor his telecoms firm Tata Teleservices, have been charged in the case.

But an independent lawmaker has said the firm gained from a 2007 policy change in the manner radio spectrum was granted. Tata would answer questions including those related to the allocation of spectrum, his spokesman earlier said.

Tata has denied his company received any undue benefits.

The graft scandal, potentially India's largest, has tarnished the stature of Prime Minister Manmohan Singh and fuelled doubts that he will not serve a full term.

The scandal has also led to several official decisions being scrutinised or reversed, raising regulatory risk.

"Norwegian authorities want to make sure the Indian government does what it can to ensure that Telenor and other foreign investors in India's telecom market receive fair treatment," Deputy Trade Minister Rikke Lind said in an email to newspaper Aftenposten.

The trade ministry confirmed the content of the email to Reuters.

Adding close to 19 million phone users a month, India is the world's fastest-growing and the second-largest telecoms market, but fierce competition and rock-bottom call rates have made it rough going for the 15 operators that slug it out.

Shares in Reliance Communications, DB Realty and Unitech, whose units were charged on Saturday, all fell on Monday, lagging a broader market that ended higher on the day.

Andimuthu Raja, the telecoms minister during the licence allocations, was forced to resign after the scandal erupted last year. Raja, who is under detention, was charged on Saturday with abuse of official position, cheating and criminal conspiracy.

Tata had earlier backed Raja and the policy changes he made, saying they "broke the powerful cartel which had been holding back competition".

All of the accused in the case have denied wrongdoing.

On Monday, Telenor said the events described in the charges were prior to its entry into India and the firm would "fight for its rights."

"(Telenor's investment) was in a company that already had a genuine license issued by the Indian government with all necessary approvals. These investments were cleared by the Government of India at each stage," it said in a statement.

Earlier on Monday, lawmakers questioned powerful lobbyist Niira Radia, who has represented Tata Group companies as well as Tata himself.

The indictments and the questioning are unlikely to ease pressure on Singh's government. The main opposition Bharatiya Janata Party (BJP) said police had not followed leads on the involvement of Congress ally DMK, the regional party to which Raja belongs.

Anil Ambani, the billionaire chairman of Reliance ADA group, is due to appear before the parliament panel on Tuesday.

India may have lost as much as $39 billion in revenue when 2G mobile phone licences were granted in 2008, the state auditor has estimated, a sum equivalent to the country's defence budget.

Apart from the PAC, the scandal is also being investigated by a special cross-party parliamentary committee.

The police investigation is being monitored by the Supreme Court, which earlier reprimanded Singh for not moving quickly enough to act against his minister.

Several corruption scandals, which include charges of graft in the run-up to the 2010 Commonwealth Games and allegations officials at state-run banks took bribes for corporate loans, have undermined Singh's image as a clean and effective leader.

They could also affect the performance of his ruling Congress party in five state elections in April and May, in which the party must perform well to regain its lost political currency. The first round of elections began on Monday with Assam going to polls.

(Additional reporting by Henry Foy and Devidutta Tripathy in NEW DELHI and Wojciech Moskwa in OSLO; Editing by Sanjeev Miglani)

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